When people decide to hire Atlanta bankruptcy law firms to file for bankruptcy, a common question they have is how the filing will impact their credit. The attorneys at Clark & Washington, a law firm focusing exclusively on Chapter 7 and Chapter 13 bankruptcy, are always happy to answer client questions. Filing for bankruptcy is a major decision with financial and legal implications, so knowing how it will impact your credit is important.

What is Chapter 13 Bankruptcy?

Also referred to as a wage earner’s plan, Chapter 13 bankruptcy allows petitioners who meet filing requirements to create a plan to repay their creditors over time. The amount you must pay is not necessarily the full amount owed, and your filing prevents creditors from contacting you about past-due bills.

A bankruptcy court will allow a period of three to five years to pay all creditors. Whether you receive three years or five years to complete your payment plan depends on where your income falls among the median household income in Georgia. You make one monthly payment to the bankruptcy court that a trustee distributes among your creditors. Here are two additional advantages of hiring Atlanta bankruptcy law firms to start your Chapter 13 filing:

  • Greater opportunity to save your home from foreclosure by catching up on delinquent mortgage payments over time.
  • Chapter 13 bankruptcy offers a special provision for co-signers that protects them from the consequences of the other party’s bankruptcy.

You are eligible to file for Chapter 13 bankruptcy if your unsecured debts are less than $394,725 and your secured debts are less than $1,184,200. These amounts fluctuate upwards every few years to reflect the current consumer price index. Your Chapter 13 bankruptcy attorney from Clark & Washington will inform you about the type of documentation you need and the official forms you need to complete.

Bankruptcy Courts Report All Cases to Credit Reporting Agencies

credit and bankruptcy in georgia

Since bankruptcy is a matter of public record, details about your Chapter 13 filing will remain on your credit file for up to seven years. The reporting period is 10 years for Chapter 7 bankruptcy. If you already have a low credit score, filing for bankruptcy will not cause a significant drop in either case.

Bankruptcy Court Rules for Obtaining New Credit After Filing for Chapter 13

After the bankruptcy court approves your repayment plan to creditors, it typically prevents you from obtaining new credit until you have submitted your last payment. Bankruptcy trustees also understand that emergencies happen, such as needing to replace your car or furnace during the three to five-year repayment period.

Should you need to obtain new credit to manage an emergency, contact your attorney at Clark & Washington for guidance. We will file a court motion on your behalf and help you locate a creditor willing to work with you. You are free to apply for credit on your own once you receive a final discharge of debt in your bankruptcy case. However, you must be careful not to take on more than you can manage and you should expect to pay higher interest rates until you can improve your credit score.

Creditors Prefer to Work with Chapter 13 Bankruptcy Filers Over Chapter 7 Bankruptcy Filers

Chapter 7 bankruptcy wipes out most debt, which means that creditors offering unsecured accounts like credit card issuers and medical facilities must write off the balance. With Chapter 13 bankruptcy, most receive at least partial payments over time. Creditors view this option as more desirable when considering you for future credit, not to mention that it has less of an impact on your credit score.

Maintaining the Accuracy of Your Credit Information After Chapter 13 Bankruptcy

In addition to using credit sparsely and responsibly, consider requesting your credit report regularly to ensure that it is accurate. The Fair Credit Reporting Act (FCRA) entitles consumers to one free report each year from each of the major reporting agencies. Since the coronavirus pandemic started two years ago, some credit agencies have allowed consumers to request a free report once a week to track their credit.

When reviewing your credit report, make sure that the accounts included in your three to five-year repayment plan show as “included in bankruptcy.” You also want to make sure that your bankruptcy case shows as discharged once you have met all your payment obligations. If an account should show as part of your bankruptcy and does not appear that way, lenders will assume it remains unpaid and delinquent.

Do You Qualify to File for Chapter 13 Bankruptcy?

We understand you are in a difficult position and feel a lot of stress. We invite you to contact our law firm at the Georgia location closest to you to request an initial consultation. We are ready to start working with you right away after determining that you meet Chapter 13 qualification guidelines.